Environmental, social, and governance (ESG) standards are being promoted in India in a big way, and businesses and individuals alike are starting to place a greater emphasis on sustainability. Companies with robust ESG strategies are becoming more and more appealing to investors as a result of this shift towards conscientious living, which emphasises policies like employee welfare, proactive social responsibility, and carbon footprint mitigation.
The Significance of ESG:-
With 80% of the biggest corporations in the world admitting to being exposed to risks related to climate change, recent polls have demonstrated the significance of ESG. Businesses are expected to lose more than $1.3 trillion as a result of these disruptions by 2026. 77% of individual investors are drawn to businesses that generate market-rate financial returns while also having a good social and environmental effect, according to a survey from the Morgan Stanley Institute for Sustainable Investing. Furthermore, for the upcoming year, around 60% of investors worldwide intend to raise their sustainable investment portfolios.
This trend is also reflected in consumer behaviour, with 50% of consumers in 2021 being willing to spend 59% more for goods that are considered sustainable or socially responsible. Businesses are under pressure to incorporate more sustainable solutions into their strategy due to the increased demand for sustainability. ESG-focused investments are predicted to climb from $18.4 trillion in 2021 to $33.9 trillion in 2026, according to a 2022 PwC analysis. Asia-Pacific (APAC) might triple its ESG investments to $3.3 trillion by 2026.
Performance of ESG in India:-
By introducing ESG disclosures into the Companies Act of 2013, India has taken the lead in adopting ESG laws. Problems still exist, nevertheless, mainly with regard to environmental and labour hazards. In the past year, there has been a decrease of more than 31% and 6%, respectively, in the danger indices for forced labour and freedom of association, according to a 2023 study.
Positive steps in the direction of a more ethical industrial viewpoint are being taken by the Business Responsibility and Sustainability Report (BRSR), an initiative launched by SEBI that requires the top 1,000 listed businesses to reveal their ESG compliances. Numerous Indian businesses still find it difficult to comply with ESG regulations. According to a Deloitte India poll, only 25% of companies in the nation think their suppliers are sufficiently prepared to meet their ESG compliance standards, and only 27% of organisations feel they can.
Proactive Steps for Indian Organizations:-
In order to guarantee the strong incorporation of long-term ESG policies, businesses must embrace core approaches for medium- and long-range effects. In order to assess performance and rank stakeholder needs, organisations must first determine where they are in both current and future markets. In order to improve key value drivers including customer-centric mindset and sales productivity, as well as to show a company’s commitment to social responsibility, it is imperative that ESG strategies embrace the UN’s Sustainable Development Goals (SDGs).
Businesses can establish clear strategic goals like supplier development, energy efficiency, product re-engineering, eco-innovation, and customer experience improvement by using diagnostic workshops powered by Value Stream Analyses to assist them design roadmaps towards their ESG objectives. It is essential to regularly monitor results in order to find gaps between development and execution and guarantee desired long-term effects.
Organisations must recognise their place in this changing landscape and adjust to the new paradigm of consumer behaviours and investor interactions as the globe grows increasingly sensitive to issues related to human rights and climate change.